If the dollar _____ because of a capital inflow from Asia, the U.S. balance of payments on financial account will _____, and the U.S. balance of payments on current account will _____.

Question

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When the dollar appreciates due to a capital inflow from Asia, it means that the demand for the dollar has increased. This would cause the balance of payments on financial account to increase, as there would be more inflow of money from Asia to the U.S. However, the balance of payments on the current account would decrease, as the appreciation of the dollar would likely make U.S. exports more expensive, decreasing demand for them and increasing demand for cheaper foreign imports, thus resulting in a higher deficit in the current account.

If the Dollar _____ Because of a Capital Inflow from Asia